Bitcoin is heading for the weekly close and all eyes will be on its price. It has had nine negative weekly candles in the past, so the question is whether it will continue this trend or make a 10th weekly red candle.
According to CryptoQuant’s analyst, the capitulation by long-term holders in this bear market is now underway, which may indicate optimism.
Long-Term Holders Capitulation: How Does It Work?
First, let’s clarify that capitulation when trading or investing – just like in the traditional sense – means someone has lost all hope of their position reaching its goals and is ready to let it go.
The capitulation of long-term BTC holders in the current context means that entities or individuals who have held BTC for a long time are leaving their trades, even if they make a profit.
This is crucial because markets tend not to bottom when they suffer huge losses.
Markets tend to reach a bottom when huge losses are inflicted upon market participants. This is known as “capitulation” in bear markets. Long-term holders usually capitulate after a long period.
Important to remember that this may not be an instant event and that it could take several weeks or even months for long-term holders of the title to finally surrender.
As you can see, in 2018 and 2014/15, long-term holders had to surrender for months. However, in 2020, the COVID crash was only a matter of days.
A good sign for Bitcoin’s price?
This is dependent on your perspective. It is possible that more selling will occur in the future because the capitulation phase has already begun. It also means that the market has moved closer to the bottom.
The analyst commented on the matter, taking into consideration the chart above:
Long-term holders’ SOPR measures the profits and losses realized by this (LTH). cohort. Evidently, there was a long period of capitulation by long-term holders during bear markets. These participants were selling their coins at a loss to other participants or “smartmoney,” who are willing to purchase an undervalued asset in large chunks and keep it for exceptional returns in the future bull.
The analyst also concluded that long-term investors are selling at a loss. This could indicate “that the smart money accumulation stage has begun.”
Marla Brooks – Financial Analysis
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